Correlation Between CTBC Financial and Hotel Royal

Can any of the company-specific risk be diversified away by investing in both CTBC Financial and Hotel Royal at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining CTBC Financial and Hotel Royal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CTBC Financial Holding and Hotel Royal Chihpen, you can compare the effects of market volatilities on CTBC Financial and Hotel Royal and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in CTBC Financial with a short position of Hotel Royal. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTBC Financial and Hotel Royal.

Diversification Opportunities for CTBC Financial and Hotel Royal

-0.69

Correlation Coefficient

CTBC Financial  Hotel Royal

Excellent diversification

The 3 months correlation between CTBC and Hotel is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding CTBC Financial Holding and Hotel Royal Chihpen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotel Royal Chihpen and CTBC Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on CTBC Financial Holding are associated (or correlated) with Hotel Royal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotel Royal Chihpen has no effect on the direction of CTBC Financial i.e., CTBC Financial and Hotel Royal go up and down completely randomly.

Pair Corralation between CTBC Financial and Hotel Royal

Assuming the 90 days trading horizon CTBC Financial Holding is expected to generate 0.31 times more return on investment than Hotel Royal. However, CTBC Financial Holding is 3.22 times less risky than Hotel Royal. It trades about 0.0 of its potential returns per unit of risk. Hotel Royal Chihpen is currently generating about -0.05 per unit of risk. If you would invest  3,905  in CTBC Financial Holding on October 6, 2024 and sell it today you would lose (5.00) from holding CTBC Financial Holding or give up 0.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

CTBC Financial Holding  vs.  Hotel Royal Chihpen

CTBC Financial Holding

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CTBC Financial Holding are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, CTBC Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hotel Royal Chihpen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hotel Royal Chihpen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with CTBC Financial and Hotel Royal

The main advantage of trading using opposite CTBC Financial and Hotel Royal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTBC Financial position performs unexpectedly, Hotel Royal can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Hotel Royal will offset losses from the drop in Hotel Royal's long position.

The idea behind CTBC Financial Holding and Hotel Royal Chihpen pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.